Grade attacks ITV payment to ITV /30 pt of spacey

The £57.3m that Channel 4 will pay to ITV this year could have been spent on 400 hours of new programming, creating 1,000 production jobs, according to Michael Grade, the station's chief executive.

Mr Grade said yesterday that the payment, calculated under a funding formula in the Broadcasting Act (1990), was a 50 per cent rise on last year's figure and represented "Alice in Wonderland accounting" which relegated viewers' interests below those of ITV shareholders.

Last month, Stephen Dorrell, the Secretary of State for National Heritage, rejected calls for an amendment to the 1990 Act, which provided a safety net for Channel 4 when it began selling its own air time independently of ITV at the beginning of 1993.

Mr Grade said yesterday that Mr Dorrell's decision had shown "contempt" for viewers. He added: "We're getting rather fed up with funding the executive bonuses and share options in ITV companies that our donations are triggering."

Under the legislation, if Channel 4 fails to achieve 14 per cent of terrestrial advertising revenue, the ITV companies must make up the difference. Half of any revenue earned above 14 per cent must in turn be handed over to the ITV companies. A quarter goes into a "rainy day" fund, while only the final quarter could be put towards programme production.

The commercial performance of the channel has outstripped all expectations. In the first year of operation, Channel 4 was forced to pay out almost £40m. With annual revenue up by nearly 20 per cent to £393m, the Independent Television Commission has toldChannel 4 it must now pay £57.3m.

Mr Dorrell argued it would be unfair to change the formula because when ITV companies were preparing their licence bids many had based their business plans on income from Channel 4.

Sir Michael Bishop, Channel 4's chairman, has written to Mr Dorrell saying that if the formula was abolished, it would recompense any ITV company that could show it had not already received the income it projected in its business plan.